Coinsurance and copays are two types of health insurance costs that you incur for healthcare services.
A copay is generally a set price that varies by the type of care. Coinsurance is a percentage of a medical bill you pay after reaching your deductible and before hitting your out-of-pocket max. These out-of-pocket costs typically influence how much you pay for health insurance premiums.
Compare Copay and Coinsurance Costs From Our Partners
1
Aetna
Offers plans in all 50 states and Washington, D.C.
About 1.2 million
$20
2
Blue Cross Blue Shield
Offers plans in all 50 states and Washington, D.C.
About 1.7 million
$10
3
Cigna
Offers plans in all 50 states and Washington, D.C.
About 1.5 million
$0
What Is a Copay?
A copay (short for copayment) is the amount you pay at the time of your healthcare visit. You pay a copay to a doctor, pharmacist or other medical professional rather than the health insurance company.
Copays vary depending on the type of healthcare services and preventive care. For example, an annual physical may not have a copay. A copay is generally lower to see a primary care physician than a specialist. Health insurance companies prefer you receive care from a primary care provider since it costs them less than paying a specialist.
The same goes for emergency rooms vs. urgent care centers. Health insurance plans typically charge higher copays for emergency rooms since they cost more to reimburse for care than urgent care centers. Health plans usually waive emergency department copays if you’re admitted to the hospital.
What Is Coinsurance?
Coinsurance is a percentage of a healthcare bill you pay after reaching your plan’s deductible and before hitting a plan’s out-of-pocket maximum.
Most health plans have a deductible, coinsurance and out-of-pocket max. The annual health insurance deductible is what you have to pay for healthcare services before your health insurance company begins to pay for services. You then reach the coinsurance portion.
During coinsurance, you split the costs for healthcare services with your insurer. Coinsurance levels are often between 20% and 40%, depending on the health plan. Unlike copays, coinsurance doesn’t have different amounts based on the type of care.
Plans with lower coinsurance levels often have higher premiums; plans with higher coinsurance levels may have lower premiums. The Affordable Care Act (ACA) marketplace, sometimes called Obamacare, is an example of how this works. ACA plans are separated by metal tier. The metal tier dictates how much you may pay in premiums and out-of-pocket costs.
Coinsurance Examples for Affordable Care Act Health Plans
| Metal tier | Portion you pay for services | Portion the insurance company pays for services | Average monthly cost for an unsubsidized health plan for an individual age 40 |
|---|---|---|---|
|
Bronze
|
40%
|
60%
|
$420
|
|
Silver
|
30%
|
70%
|
$549
|
|
Gold
|
20%
|
80%
|
$713
|
|
Platinum
|
10%
|
90%
|
$744
|
Once you reach your out-of-pocket max, the insurance company picks up the rest of the year’s healthcare service costs.
Obamacare costs vary based on the metal tier. You’ll generally pay less for coverage if you choose a health plan with higher coinsurance levels, such as a bronze or silver plan. The downside is that you’ll pay more when you need healthcare.
If buying an individual health plan through the ACA marketplace, you’ll want to weigh the pros and cons of a higher premium or higher coinsurance and deductible when deciding on bronze, silver, gold or platinum health insurance.
Copay vs. Coinsurance: Understanding the Differences
| Copay | Coinsurance | |
|---|---|---|
|
When is it paid?
|
At time of visit.
|
Your health plan reviews the health insurance claim and pays what it owes. The health provider then bills you for the remainder of the costs.
|
|
Is it a dollar amount or a percentage?
|
Typically a dollar amount, but some plans may charge a percentage of the visit’s cost instead.
|
A percentage.
|
|
Does the cost vary?
|
Copay costs vary based on the type of care, such as primary care, specialist or emergency.
|
A set percentage, such as 20%, 30% or 40%.
|
|
Does it go toward your deductible?
|
No, not for most plans.
|
No, coinsurance doesn’t start until after you reach your deductible.
|
|
Does it go toward your out-of-pocket max?
|
Yes
|
Yes
|
|
Do you pay it before you reach your plan’s deductible?
|
Yes, you pay copays both before and after reaching your plan’s deductible.
|
No, you don’t pay coinsurance before reaching your deductible.
|
What Are Out-of-Pocket Maximums?
An out-of-pocket maximum is the most you’ll pay for in-network healthcare services within a year. Once you reach your out-of-pocket maximum, your health plan pays all the costs for in-network healthcare services.
If you were to receive out-of-network care, you may still have to pay for those services because they’re not considered inside your plan’s provider network.
Let’s take a look at the different levels.
Example of Paying for Healthcare Services
| Type of health insurance cost | What it is |
|---|---|
|
Premium
|
You pay a premium to have health insurance coverage.
|
|
Copay
|
A copay is paid at the time of the visit. The amount depends on the type of service.
|
|
Deductible
|
You pay all of the healthcare services until reaching your plan’s deductible.
|
|
Coinsurance
|
After reaching your deductible, you pay a percentage of the costs until meeting your out-of-pocket max.
|
|
Out-of-pocket max
|
Once you’ve reached your out-of-pocket max, the health insurer picks up all the costs for the year.
|
Those are just some of the differences between a deductible vs. out-of-pocket maximum and other types of costs.
Do Copay and Coinsurance Count Toward Out-of-Pocket Maximums?
Yes, copays and coinsurance count toward your out-of-pocket maximum.
Copays are generally less expensive than coinsurance, so coinsurance will comprise much more of your out-of-pocket costs than copays. For instance, a primary care visit may cost you $25 for a copay, while that visit may cost you hundreds or thousands in coinsurance for tests and services.
Are Copays and Coinsurance Tax-Deductible?
Copays and coinsurance may be tax-deductible, but it depends on whether you were reimbursed for those costs, such as by an employer.
You would need to itemize the deductions on Schedule A (Form 1040), Itemized Deductions rather than take the standard tax deduction. The standard deduction for a 2023 tax return is $13,850 for individuals, $27,700 for married couples who file joint and surviving spouses, and $20,800 for head of household.
You can only deduct total medical expenses exceeding 7.5% of your adjusted gross income. Medical care expenses that you can deduct include deductibles, coinsurance and copays.
Health insurance premiums can also be tax-deductible, such as:
- If you get coverage through the ACA marketplace, you can deduct the full cost of your premiums if you use pre-tax dollars to pay premiums.
- When you’re self-employed, you can adjust your taxable income for the health insurance premiums you pay. It’s technically not considered a tax deduction.
- If you’re a W-2 employee, you can only deduct out-of-pocket costs of your employer-sponsored health insurance premium if you itemize deductions and medical costs exceed 7.5% of adjusted gross income.
Do All Health Insurance Have Copays and Coinsurance?
Most plans have copays and coinsurance, but you may come across a health plan that doesn’t have either copays or coinsurance.
For instance, a health plan may have a deductible and out-of-pocket maximum that’s the same amount. In that case, you would pay up to the annual deductible and then the health plan would pick up the rest of the costs for the year.
Catastrophic health insurance, available only to people under 30 and those facing severe economic difficulties like homelessness, is one example of a plan without coinsurance.
Should I Choose a Plan with Coinsurance or Copays?
Health insurance plans typically have both coinsurance and copays, so there’s not an either/or situation. Copays generally cost less than what you will send for coinsurance when receiving care.
For instance, a copay might be $20 to see a primary care physician, but the cost for a percentage of the services you receive during the visit (the coinsurance amount) will likely be much more than $20.
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Key Points
When choosing a health plan, you want to review all costs: premiums and out-of-pocket costs like copays, coinsurance and deductibles. Make sure especially to check the coinsurance percentage and deductible. Those out-of-pocket costs will likely influence how much you pay for healthcare services more than copays.
